Coinbase Under Fire for Blocking VPN Users, Sparking Privacy Concerns

Users criticize crypto exchange's decision to block VPN access, calling it an ineffective security measure

  • Coinbase restricts accounts accessing platform through VPNs
  • EthHub co-founder’s $25,000 USDC transfer blocked due to VPN usage
  • Product designer confirms VPN use triggers negative risk assessment
  • Users criticize policy as privacy rights violation
  • Annual anti-money laundering compliance costs estimated at $213 billion

Cryptocurrency exchange Coinbase faces user backlash after implementing restrictions on accounts accessing the platform through Virtual Private Networks (VPNs), highlighting tensions between security measures and user privacy in digital asset trading.

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VPN Restrictions Spark Controversy

The issue gained attention when EthHub co-founder Eric Conner reported his account was frozen while attempting to transfer $25,000 in USDC. Coinbase product designer Scott Shapiro confirmed that VPN use triggers negative risk assessment markers, stating, "Attackers always use VPNs, so our risk models take that as a negative sign even if you’re legitimately using your own account."

Industry Response

Security experts and industry figures criticized the policy:

  • Kraken‘s chief security officer warned about forcing users to choose between financial freedom and physical safety
  • Multiple users highlighted privacy concerns and threatened to stop using the platform
  • Some defenders, including Blockworks co-founder Jason Yanowitz, supported Coinbase’s security-first approach

Regulatory Context

The controversy emerges amid broader discussions about financial access. Coinbase CEO Brian Armstrong recently criticized anti-money laundering regulations, citing their $213 billion annual compliance cost and negative impact on consumers.

Resolution and Impact

While Conner eventually regained account access, he emphasized that his public profile helped resolve the situation, suggesting others might face more challenging resolution processes. The incident raises questions about balancing security measures with user privacy rights in cryptocurrency trading platforms.

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